Mike Meyer’s excellent piece in the Star Tribune today on Nobel Prize winner Leonid Hurwicz, a 90-year-old economist at the U of M, provides talking points for those of us who believe that public good and private good should be balanced and that the marketplace has its limits.
Hurwicz, it turns out, was not only a longtime progressive activist, but his work was built around the idea that the effectiveness of markets is hampered by the fact that some players have much more information than others. Also more money, but more on that later.
The “incentive compatibility’’ principles advanced by Hurwicz and his colleagues have led to some real-life improvements in the way public and private interests are balanced. Cited as examples were government “auctions” for pollution credits, which resulted in a reduction in the pollutants that caused acid rain, and for cell phone frequencies, which resulted in substantial government revenues and more efficient telecommunication systems.
A colleague of Hurwicz says that in the 1950s, the alternatives would have been total control of those spheres by either business or government.
On another quadrant of the unequal playing field, conservative columnist George Will this week delivered an uncharacteristically derisive piece about the pain and suffering among the super-rich. Apparently, they are having to spend a lot more money and find new luxuries to differentiate themselves from the merely rich.
Picking up on the term “plutonomy’’ to describe this privileged elite, Will cites a figure often promulgated by progressives, noting that the richest 1 percent of households in the United States owns more than half the nation’s stocks and controls more wealth than the bottom 90 percent.
Will neglects to mention that the top 1/10th of a percent —where the truly rich and the super-rich reside — also enjoys the greatest income growth. Dalton Conley, a sociologist at New York University, put it another way in a WSJ article looking at the use of debt to stay afloat in the earnings stratosphere:
"What we're seeing is the top 1% struggling to keep up with the top 1/10th of 1%," he adds. "And those people trying to keep up with the top 1/100th of 1%. There is a drive by the merely rich to keep up with the obscenely rich."
Will goes on to mockingly lament the fact that the Cost of Living Extremely Well, an index calculated by the folks at Forbes, is rising much faster than the Consumer Price Index.
We wrote last summer about Census Bureau statistics for Minnesota that show a spike in luxury spending, and we posited that most forms of public investment — in education and transportation and health care — are actually a better deal for more people than at least some forms of personal spending.
It’s nice to have George Will ratify that the excess is getting a little wretched.
— Dane Smith and Charlie Quimby